Approximately 100 regional business leaders gathered this week for the Greater Washington’s Board of Trade regional policy forum, reports Paul Duning, publisher of the Capitol Communicator, who provided the following report on the forum.
Jim Dinegar, BOT president and CEO, moderated a panel of those in the know about the region’s financial health. Peter Franchot, Maryland comptroller; Dr. Natwar Gandhi, DC’s chief financial officer; and Secretary Ric Brown, Office of Finance, Commonwealth of Virginia, shared the harsh reality of the challenges facing our region’s citizens and business leaders.
“The economy in Maryland, short term, is a mess”, said Franchot. “We are seeing extraordinary results at the state level. Final tax payments for 08 were 32% down from 07. Sales tax is down 12 to 13% and estimated tax payments for 09 are off by almost 15% from the previous period. Even with the record tax increase a year-and- a-half ago and slot revenue, the deficit is still $1.8 billion and expected to grow significantly next year. Unemployment is almost double. Even though there are some signs of bottoming out, I personally think we are in this for the next two years. Although we are addressing through the stimulus some of the capital needs we are not addressing the debt situation nationally or locally. Fortunately the region has very strong economic bones because of the region’s life sciences, colleges and universities and proximity to federal government. Maryland is receiving $3.9 billion of federal stimulus over 9 quarters.
“The bad news, just to continue the theme here, what we see is an economic tsunami out here”, said Dr. Gandhi. The district has reduced its revenue expectations in 2009 by $400 million, 2010 by $900 million, 2011 and 2012 by a billion dollars each. Dr. Gandhi said, “Even though we have added 4,500 new jobs, there has also been a loss of 17,500 jobs. We are adding jobs in the District in government, education, health and the restaurant business regularly especially in the areas of government, education and health.” Dr. Gandhi recognizes that the federal stimulus will be a great benefit to the District, however DC has a problem because 37 percent of its residents are functionally illiterate. That is why, said Dr. Gandhi, “the District unemployment rate is almost double of the region. Given the bad news, it is important to note that the District has a balanced budget in 2009 and has proposed a balances budget to the council in 2010.” Even more importantly, in 1997 when Dr. Gandhi joined the DC government, there was a $500 million deficit. Currently the district enjoys a $1.2 billion surplus and an AAA bond rating. The district has approximately $1billion in federal stimulus available and the government plans to use every penny of it.
“Virginia has never seen anything like what it is facing now”, said Ric Brown. If we keep on track from where we are now, we will have about a $195 million shortfall between now and June 30th. We have enough cash reserves to weather this thing but we will curtail spending wherever possible between now and June 30th. It just creates a future budgetary problem we will have to fix. The primary impact of the federal stimulus package will be to save jobs in the immediate future. The longer-term impact will be to create jobs in some of the highway and water and sewer allocations of funds.
Jim Dinegar asked the panel what was the chance of a gas tax in each of their jurisdictions and all said basically not a chance right now. He also asked the panel if they thought we hit bottom and that a turnaround was near and all felt that we have not hit bottom and it could be 2011 before we come out of the recession. Although Franchot believes the recession will continue for a while, he believes there is unbelievable opportunity for business in the region to benefit from the stimulus dollars that are here.